Gerald earns a higher salary than his brother Peter because Gerald went to law school and is a lawyer, whereas Peter dropped out of college to work as a mechanic. The difference in salary illustrates a compensating differential.

Question

Quizplus · Accepted Answer

The difference in salary is more accurately attributed to human capital differences, not compensating differentials. Compensating differentials refer to wage differences designed to offset the desirability or undesirability of a job, not the skill or education level of the worker.

Gerald Earns a Higher Salary Than His Brother Peter Because